Governor of the Bank of England Mark Carney speaks at The George Hotel in Edinburgh. Photograph: Chris Watt/Getty Images

The debate on Scottish independence has centred on the economy in recent weeks, with the Bank of England governor Mark Carney and BP chief executive Bob Dudley among those to contribute to the debate. With just seven months to go before the crucial vote, the latest arguments are presented on Friday by the National Institute of Social and Economic Research (NIESR), an independent and respected thinktank.

In a series of chapters on the implications of a yes vote for tax and spending policies, pensions and currency, NIESR has set out in some details some of the challenges and opportunities Scotland would face as an independent state. The arguments are outlined below:

Government spending and taxes

More spending cuts and tax rises would be needed to ensure fiscal sustainability in an independent Scotland. That is the stark message from Rowena Crawford and Gemma Tetlow of the Institute for Fiscal Studies.

Scotland's immediate fiscal position would be in a worse state than the rest of the UK, partly because government spending per person is significantly higher in Scotland, mainly because of higher spending on public services rather than benefits. In 2011-12 this was more than matched by greater revenues from oil and gas, but over the longer term this will not be the case as oil and gas reserves – and the revenues they bring – dwindle.

The authors have calculated that while the UK as a whole would face a long-term fiscal gap – the difference between outgoings and receipts – of 0.8% of GDP, it would rise to 1.9% for Scotland.

"This suggests that Scotland would be required to make more spending cuts and/or tax increases after independence (in addition to those already planned by the UK government) in order to ensure long-run fiscal sustainability," they write.

On the plus side, the authors say that independence would afford the opportunity to reform the tax and benefit system so that it is better aligned with the country's needs.

For example, the tax system would need to be changed to suit a small independent country which shares an open border with a larger neighbour. However, while the differences between the two economies might imply that Scotland should have a lower level of tax than the UK, long-term fiscal pressures suggest higher taxes might be required.

"A key challenge for an independent Scotland would be balancing these (potentially competing) pressures," Crawford and Tetlow conclude.

Scotland's economic performance and the fiscal implications of independence

Scotland's oil resources deeply complicate Scotland's fiscal picture according to John Mclaren and Jo Armstrong of Glasgow University's Centre for Public Policy for Regions.

Scotland's wealth tends to be overstated because although the economy benefits from North Sea oil production, a significant proportion of its domestic economy – particularly in oil, drinks, energy, and financial services – is owned by overseas stakeholders.

As a result, GDP is not as effective in terms of measuring economic performance compared with other countries. The key question is how much of the earnings from what is produced in Scotland, stays in Scotland. Based on current forecasts, North Sea tax revenues would not be enough to offset the loss of monies currently transferred from the rest of the UK, leasing to a net loss of funding at time under independence.

As a result, the Scottish government's proposed oil fund, where tax revenues would be set aside for future generations rather than used for day-to-day spending, would not only be "unaffordable", but additional spending cuts would also be required.

The picture is further complicated by the volatility of oil prices. The authors suggest that the only way to avoid a net loss of funding on independence would be if tax revenues on North Sea oil came in well above current expectations, probably as a result of above inflation rises in oil prices.

Currency options for an independent Scotland

There are three main currency options for an independent Scotland – keeping the pound, joining the euro, or having its own currency. NIESR's Angus Armstrong and Monique Ebell argue that none of the three options are ideal when all the various factors are taken into account.

However, while the Scottish National Party wants to keep the pound, the authors conclude that Scotland might find it would be better to abandon a currency union – which would be subject to tight conditions dictated elsewhere – and instead establish its own currency.

"Since commitment to a currency union by an independent country can only be conditional, an independent Scotland might find it optimal to abandon the currency union in the future if the financial stability advantages to having its own currency begin to outweigh any disadvantages due to trade and transactions costs," they write.

The outlook for funding pensions

As the vote on Scottish independence draws ever closer, voters are seeking reassurance that they will be no worse off for future pensions.

The costs of the state pension would be lower in Scotland because the country has a lower life expectancy than the rest of the UK. In theory then this would lower the cost of government contributions, because people would draw pensions for a shorter period, or delay the increase in the state retirement age in Scotland compared with the rest of the UK.

The picture is complicated by Scotland's smaller working age population than the UK meaning the costs of the state pension as a share of tax revenues will be higher for an independent Scottish government as the population ages.

Scotland also has a larger public sector than the rest of the UK, and so the Scottish government would have to make relatively higher employer contributions.

Independence would also lead to the creation of a Scottish bond market in which pension funds would invest. If Scotland had to pay more for its debt than the UK, as is likely, then pensions would be cheaper to buy. On the flip side, taxpayers would lose out because of the higher cost of government debt.

"This is good for pensioners, but bad for taxpayers or for the consumers of public services, since they have to meet the higher costs of Scottish debt either through higher taxes or reduced services," the authors from the University of Stirling write.

Ultimately they conclude that rising life expectancy and growing pensioner dependency "will pose critical challenges" for pensions affordability in Scotland, irrespective of whether it is independent or not.

Scotland's ageing population

Scotland is in a worse demographic position than the rest of the UK, with a more rapidly ageing population. It leaves Scotland in a worse state in terms of output per person, total government spending, and the subsequent impact on the quality of public services, according to Katerina Lisenkova of NIESR and Marcel Mérette from the University of Ottawa: "Scotland is worse off in the case of independence as against the status quo." Income tax would probably have to rise to offset some of the other negative financial effects, although an independent Scotland would also have the power to adjust its immigration policy in order to tackle its demographic challenges.

Overall the authors argue that population ageing is a major issue for both Scotland and the rest of the UK. Demographics, therefore, are "not a strong argument influencing the choice between the status quo and independence".

Lessons for Scotland on the political economy of small European states

An independent Scotland would have the flexibility to redefine itself but it would also have to face some of the more difficult challenges it has avoided in the past. Among the most difficult would be decisions on significant tax rate changes, which have previously been out of the Scottish government's hands. Small states can also find themselves at a disadvantage in world markets.

According to Michael Keating and Malcolm Harvey from the University of Aberdeen, the authors of this paper, social investment strategy has underpinned Scottish policy since devolution, and the theme recurred in the Scottish government's white paper on independence published last year – encouraging union representation for example. The white paper also promised an expansion of child care, cuts in corporation tax, and the abolition of passenger transport duty, without asking anything of business in return, or stating that it would have to be part of a wider package of measures.

"It is possible that independence itself could provide the shock that would shift old practices and attitudes. This would not in itself, however, allow it to escape some of the essential choices that must be made about policy and institutions," the authors conclude.

Andrew Sparrow’s rolling coverage of all the day’s political developments as they happen, including George Osborne’s speech on Scottish independence, all three main UK parties ruling out a currency union with an independent Scotland, and reaction